Cruz: Tax Reform May Be Delayed Until Next Year

After the disappointment on Obamacare, Republicans looked to tax reform to score an elusive legislative victory.

By David Thornton

Speaker Paul Ryan (R-Wisc.) set a goal for passing the tax reform bill by the end of the year, but Sen. Ted Cruz (R-Texas) is casting doubt on that timetable.

On CNBC, Cruz said, “I believe that we will get tax reform done,” but that it will be “late this year or early next year.”

There are big obstacles in the way. FiveThirtyEight explained that there was one major division among Republicans on healthcare, while there are at least three different GOP divisions on tax reform. Sen. Bob Corker (R-Tenn.), who has been under attack by President Trump in recent weeks, leads a faction of deficit hawks who insist that tax reform not add to the deficit.

There is the question of whether to make the tax cuts permanent or temporary. Under reconciliation rules, the bill cannot increase the deficit after 10 years. One way of preventing the CBO from scoring the bill as increasing the deficit is to make the cuts temporary. Temporary tax cuts can lead to a fiscal cliff like the one Congress faced under President Obama.

A third question is who gets the tax cuts. Senators Rand Paul (R-Ky.), Marco Rubio (R-Fl.) and Mike Lee (R-Utah) have indicated that the current plan does not cut taxes enough on the middle class. In particular, Paul said that the bill “should not be a tax hike on anyone.” But if tax cuts are increased for one group, the questions of deficit scoring and whether they are to be permanent are raised once again.

The question of whether to end the federal tax deduction for state income taxes has been particularly thorny. Cruz said, “We can end that deduction if we’re lowering the tax rate enough that even people in those blue states are seeing a net tax reduction.”

“I do think virtually every Republican wants to get to yes,” Cruz said, but noted that the slim Republican majority in the Senate made passing any major bill difficult.

“We have an excruciatingly narrow majority, 52 Republicans” Cruz said. “That means if any three Republicans jump ship, we’re toast. Wrangling together 50 out of 52 Republicans with this very diverse, fractious conference is not easy.”

There are already four Republicans who have been identified as potential mavericks on the bill. Bob Corker, who is concerned about the effect on the deficit, as well as John McCain (R-Ariz.) and perennial swing votes Susan Collins (R-Maine) and Lisa Murkowski (R-Alaska) will be senators to watch.

The new Alabama senator may present a problem as well. Even if Republican Roy Moore wins the senate race there, Moore is an avowed opponent of Majority Leader Mitch McConnell and is unlikely to be a reliable vote. Moore’s position on the tax bill is uncertain, but he had opposed the Republican Obamacare reform bill.

Passing tax reform may be critical for Republicans in the 2018 midterms. Cruz acknowledged that “people are frustrated” because the Republican congressional majority is “not getting the job done.” With former White House strategist Steve Bannon leading a right-wing revolt against incumbent Republican senators, failure to win a victory on taxes could have dire consequences for the party.